Death as a result of active service - complete exemption from Inheritance Tax

The estates of servicemen and women who die as a result of active service are exempt from inheritance tax. With an increasing number of estates in recent years having been over the inheritance tax threshold, this exemption can be very important and advantageous to surviving families.

It is important to note that the exemption applies not only to the estates of those who lose their lives during active service - whether as a result of enemy or terrorist action, accident or disease - but also to the estates of those who die years later as a result of such causes.

"Active service" does not necessarily mean that a declaration of active service (for purposes of service discipline) had been in force at the time. Nor is it necessary for the veteran to have been awarded any war pension or compensation payment for the wound, injury or disease, although it would be helpful in proving the case for exemption.

After the veteran dies, the executors of his or her estate will need to show that the wound, injury or disease was inflicted or contracted while on active service and that this contributed to or hastened death.

Both the veteran and his or her family should therefore be aware of the importance of keeping records, and of consulting your legal and tax advisers about the issue.

'Inheritance tax loophole for families of soldiers'

(Observer, Money, 25 May 2008) The estates of ex-service people who have died from injuries sustained in war zones are exempt from death duties, writes Helen Pridham. British soldiers and other members of the armed forces injured while serving in Afghanistan or Iraq are being advised to keep copies of their medical records as their families could be exempted from paying inheritance tax (IHT) in future. The beneficiaries of people in their 80s or older who died from a condition related to their active service in the Second World War are able to claim this exemption, although many families may not be aware they can do so because of a lack of professional advice. Andrew Goldstone, tax partner at solicitors Mishcon de Reya, explains: 'Someone who is blown up by a mine is clearly covered by this exemption but it also covers the long-term effects decades later of some injury or disease someone may have suffered connected with their military service which is then linked to whatever it is that kills them.' He says there is little public awareness of the exemption and even in the legal profession awareness is 'patchy'. ...

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